Energy conservation and substitution project
Report No: ; Type: Report/Evaluation Memorandum ; Country: Yugoslavia; Region: Europe And Central Asia; Sector: Other Finance;
Other Power & Energy Conversion; Major Sector: Finance; Electric Power & Other Energy; Project ID: P009217; P038995
Yugoslavia: Energy Conservation and Substitution Project (Loan 2790-YU)
The Implementation Completion Report (ICR) on the Yugoslavia Energy Conservation and Substitution
Project (Loan 2790-YU, approved in FY87) was prepared by the Europe and Central Asia Regional Office,
and includes the Borrower's comments. The loan, in the amount of US$90 million, was closed on June 30,
1994, after an 18-month extension. Some sub-projects were canceled late in the implementation stage due to
changes in the economic environment during Slovenia's transition to a market economy. As a result, US$2.0
million remained undisbursed at project closure and was canceled.
The project's main objectives were to: (i) reduce Yugoslavia's energy import bill and improve the cost
competitiveness of export industries, primarily in Slovenia, by promoting energy efficiency investments; (ii)
strengthen institutional capacity for implementing energy audits in Slovenia; and (iii) strengthen the
financial/institutional capacity of the apex Borrower. The project scope was expanded in June 1990 to
include support for environmental conservation and improvement investments. In 1991, when it became clear
that as a result of the breakup of Yugoslavia and the subsequent loss of protected domestic markets, there
would be very little additional demand for loan funds from the industrial sector, the project focus was shifted
to emergency rehabilitation, and US$30 million was reallocated to the rehabilitation of infrastructure
damaged by extensive flooding in Slovenia in November 1990.
Overall, despite the external shocks to Slovenia's economy, the project proved to be generally successful.
Most subproject investments did provide for significant energy savings. More importantly, the project made
funds available for modernization investments that proved to be essential for the survival of enterprises in a
highly competitive international environment, following the loss of their internal (Yugoslav) market, although
many of the enterprises went through long periods of substantial financial losses during restructuring. In
addition, the funds reallocated to emergency infrastructure rehabilitation were used effectively to resolve
many serious infrastructure problems, particularly in water and sanitation. Although no progress was made in
developing an energy auditing capacity and the apex Borrower's finances have remained weak, the project
helped strengthen the Borrower's capacity to appraise and monitor energy conservation, substitution and
environmental and flood damage projects. Rates of return were reestimated for some industrial subprojects,
but it was often not possible to distinguish the return on the specific subproject from the profitability of the
enterprise as a whole.
The Operations Evaluation Department (OED) rates the project outcome as satisfactory because most of the
project components were implemented successfully and enhanced the competitiveness of most beneficiary
enterprises (only a few enterprises could not make the transition to an open economy). Accordingly, project
sustainability is rated as likely, and institutional development as moderate. Bank performance is rated as
satisfactory. These ratings are consistent with those in the ICR.
The major lesson of this project is that it is often advisable, and possible, to radically shift the focus of a
project when country circumstances are permanently changed.
The quality of the ICR is satisfactory. Details provided on the subloans were useful in confirming the
conclusions on the efficacy of the project. The discussion on the plans for continued operation of the project,
however, focuses too narrowly on the sub-borrower's financial performance. No audit is planned.